Banking used to be easy and hard at the same time.
It’s either you qualified for a bank account, or you just couldn’t have one.
The choice of which bank account to open used to be less complicated as well. There were just a couple of banks offering a few products each. Banks competed on price and service offerings. As a customer, you just had to decide which bank appeals to your personality through its branding messages.
But banking has evolved. Now anyone can open a bank account; just bring your ID and proof of residence.
Even better, without ever visiting the bank branch, download the app, and you can start banking right away. No paperwork, just an internet connection required.
Because it’s now easier to open a bank account, banks now compete to signup new customers. Banks have had to be innovative to offer new products that appeal to all customer profiles. This means more products and more confusion over which account is best for you.
Ultimately, the best choice of bank account depends on your circumstances. But a couple of factors can help you decide if you considering opening a new bank account.
The first step is to evaluate your financial goals and your banking needs. Do you need an account for depositing your salary? Or do you just want to keep your money safe? Evaluating your needs will give you insights into the nature of your transactions.
If most of your transactions are cash, you will need an account that is more suited for cash transactions. But suppose you only do online payments and swipe your card when you need to. You will then consider an account that is more suitable for online transactions.
The second factor you have to consider when choosing which account is best for you is the volume of the transactions you expect to perform with your bank account. You will also have to consider the monetary value of your transactions to determine the best option for your needs.
For example, some bank accounts will offer you certain free transactions per month limited to a certain threshold. The threshold can be limited to certain transactions, say two free transactions under a certain category. Alternatively, the threshold will be limited to a monetary value, say free cash withdrawals up to R3000. Knowing the value and the type of most of your transactions will help you save on transactional costs.
Competition for customers keeps banks on their toes to innovate current products and service offers. Some banks now specialise their offerings for specific target customers, so if you fit the target market for a certain account, you will likely benefit more from that product.
With the prevalence of online banking, you may want to consider the ease of using the bank’s online and mobile banking platforms. The majority of these platforms are designed with usability as a priority, but it would be advantageous if you could test out which platform works best for you. Unfortunately, at the time of writing, no South African bank offers a demo account that allows users to test drive some of the features before committing to open an account.
Lastly, you may want to consider the availability of ATMs should you need cash. You have probably noticed that some bank ATMs always have very long queues in malls and shopping centres. Others only have ATMs located inside supermarkets and complexes that are closed after business hours, meaning you may struggle if you need to deposit or withdraw cash for an emergency after hours or during weekends.
The last two factors on this list consider the value you get from your bank account. You have to be aware of the costs involved in your bank account; else, excessive banking fees will derail your financial goals. Some of the costs you will have to consider include monthly account fees also known as the account maintenance fees, service fees and the transaction fees attached to some categories of transactions. Some banks will bundle the service fee together with the account maintenance fee.
Generally, there are two price options to choose from. You can either go with a bundled option that includes a range of transactions and services at no extra cost. However, this does not mean you can do an unlimited number of transactions with your account. You will have to be aware of the additional costs you will incur if you exceed your account limits.
Pay as you use (PAYU) is now a popular option with most entry-level accounts. These types of accounts usually have zero or very low monthly account fees from as little as R5.
The choice of either a bundled option or pay as you use depends on your circumstances. As mentioned earlier, this is where you consider the nature of your transactions. If you perform low volume, low-value transactions, you will probably benefit more from a PAYU account. But as the number and value of your transactions increase, there is probably a bundle option that is most suitable for you.
Sometimes, the choice of a bank account will come down to the rewards that you stand to benefit from your bank account. Rewards have become an important element in most banks’ strategies to attract and retain customers.
Most banks now have rewards programs that will reward you cashback and discounts on your purchases with certain merchants. Alternatively, you can be awarded points that can convert into cash, or you can use them to buy airtime, pay for account fees, or buy products at participating partners.
So if your favourite merchant, say your favourite store or garage, gives extra rewards to clients who pay with certain bank cards, opening an account with partner banks will open new opportunities for you to benefit from some of the reward programs whenever you spend.
Choosing a bank account can be overwhelming. There are now many banks to select from, ranging from the traditional big five to include the challenger banks. Some are completely digital with no brick and mortar presence. Others offer the best of both worlds. If you are considering a new bank account, you will want to make sure the account you choose gives you the best value. You will need to evaluate your financial goals and look out for the account that comes with costs and rewards aligned to your financial goals.